Inflation expectations indicator based on synthetic surveys

Inflation dynamics are driven by the way in which a diverse set of economic agents perceive the economic environment. Estimations of these perceptions are key features in academic and policy analyses and, as a consequence, important resources have been devoted to improving these approximations.

Prominent indicators of expected inflation are given by professional surveys, business surveys and market-based expectations. These indicators are shown to provide useful information (Berge, 2018; Candia, Coibion, & Gorodnichenko, 2023, 2024; de Mendon¸ca, Garcia, & Vicente, 2021).

In this website, we propose a novel method to extract business inflation expectations via synthetic surveys completed by finetuned large language models (LLMs). The document could be download from here.

Inflation has once again become a major concern for economic agents. The following table shows the latest numbers:

Monthly report
Annual inflation rate in the US
Inflation rate (last) Period
3.27 3.3
Source: St. Louis Fed

In the following figure, we show a strong association between inflation and synthetic business inflation expectations. A particularly noticeable feature is the increase in both indicators observed in 2021, which is later reversed by the end of the sample period. Consistently, the correlation coefficient between the time series is 0.55.

An Paula additional motivation for this project is to provide the community with the set of created indicators (downloadable here). This database will be updated regularly. In the future, we also hope to provide the LLMs so that they can be used by the community.

References

Berge, T.J. (2018). Understanding survey-based inflation expectations. International Journal of Forecasting, 34 (4), 788–801.

Candia, B., Coibion, O., Gorodnichenko, Y. (2023). The macroeconomic expectations of firms. In handbook of economic expectations (p. 321-353). Academic Press.

de Mendonça, H.F., Garcia, P.M., Vicente, J.V.M. (2021). Rationality and anchoring of inflation expectations: An assessment from survey-based and market-based measures. Journal of Forecasting, 40 (6), 1027–1053.


  1. IIEP UBA-Conicet, Facultad de Ciencias Económicas, Univ. de Buenos Aires. Facultad de Ciencias Económicas, UCA, Buenos Aires, Argentina. ↩︎

  2. IIEP UBA-Conicet, Facultad de Ciencias Económicas, Univ. de Buenos Aires. Facultad de Ciencias Económicas, UCA, Buenos Aires, Argentina. ↩︎

  3. IIEP UBA-Conicet, Facultad de Ciencias Económicas, Univ. de Buenos Aires. ↩︎